(SACRAMENTO) – Attorney General Bill Lockyer today announced a $430 million settlement with Pfizer, Inc. and subsidiary Warner-Lambert to resolve state and federal allegations of deceptive marketing, Medicaid fraud and illegal kickbacks in Warner-Lambert's promotion and sale of the epilepsy drug Neurontin.

"Drug companies' profits should not come at the expense of patient safety and the public's money," said Lockyer. "This settlement protects consumers and taxpayers by preventing unnecessary, inappropriate and potentially dangerous prescriptions for Neurontin."

The settlement requires Warner-Lambert to pay $38 million to resolve the deceptive marketing allegations. That total includes $28 million to fund a physician and consumer education program about Neurontin and similar drugs, and $10 million for investigative costs and fees. Warner-Lambert will pay another $392 million to resolve federal and state investigations of Medicaid fraud, illegal kickbacks and submitting false claims to obtain public funds. The $392 million includes a $240 million fine for violating the Food, Drug and Cosmetic Act. Warner-Lambert pled guilty to violating the Act and will pay the fine to the federal government. In addition, the company will pay $152 million to the states to settle the Medicaid fraud allegations. The Medicaid fraud portion of the settlement will become final upon approval by the states.

California's share of the settlement proceeds will total approximately $14.9 million. That includes $14.63 million for the state's portion of the Medicaid fraud settlement and $278,000 to recover fees and costs associated with investigating the deceptive marketing allegations. Of the $14.63 million Medicaid payment, California will keep $7.48 million for Medi-Cal reimbursement, penalties and interest. The balance will be remitted to the federal government.

In addition to the $14.9 million, California governmental entities, schools and nonprofit groups will be able to apply for grants under the $28 million physician and consumer education program.

The unprecedented settlement resolves consumer protection investigations by state Attorneys General, a Medicaid fraud probe by the National Association of Medicaid Fraud Control Units, and illegal kickback and false claims investigations by the U.S. Attorney's Office in Boston.

Neurontin is a prescription medication approved by the U.S. Food and Drug Administration (FDA) for treatment of epilepsy and post-herpetic neuralgia. However, about 90 percent of Neurontin prescriptions are for other, "off-label" purposes.

The deceptive marketing investigation focused on allegations that Warner-Lambert promoted Neurontin for off-label indications – including various psychiatric disorders, back pain, and headaches – in the absence of sufficient scientific evidence supporting its use for those purposes.

The Medicaid fraud and false claims aspects of the case flow from the alleged deceptive marketing. By causing unnecessary or inappropriate prescriptions of Neurontin, the deceptive promotion allegedly defrauded taxpayers and the Medicaid program. The alleged kickback scheme involved payments by Warner-Lambert to doctors in return for supporting off-label prescribing.

Aside from the alleged kickbacks, methods used by Warner-Lambert to deceptively promote Neurontin for off-label indications included: continuing medical education (CME) classes that lacked balance, misrepresented the nature of the CME and provided expensive "perks" to attending physicians; a "publication strategy" that subsidized the production and dissemination of anecdotal reports favorable to off-label use of Neurontin, but which had no scientific value; and providing incomplete information about Neurontin to the drug reference compendium "Drugdex."

As part of the settlement, Pfizer and Warner-Lambert entered into a "Corporate Integrity Agreement" with the U.S. Department of Health and Human Services' Office of Inspector General. The agreement requires the firms to closely monitor their sales and marketing practices.

The settlement also includes an "Assurance of Voluntary Compliance or Discontinuance" that prohibits or restricts Warner-Lambert and Pfizer Inc. from engaging in certain deceptive practices. They include, among others:

Making false, misleading or deceptive oral or written claims about Neurontin; promoting off-label uses in violation of the Food, Drug and Cosmetic Act; misrepresenting the nature of scientific evidence related to Neurontin; disseminating written materials that have not appeared in peer-reviewed scientific journals; failing to make disclosures about funding of research and educational events related to Neurontin; misrepresenting the credentials of sales, medical and technical personnel; violating federal anti-kickback laws; and failing to require speakers at Neurontin-related educational events to disclose financial relationships with Warner-Lambert or Pfizer.

Under the $28 million education program, up to $6 million will fund a national advertising campaign to provide physicians and other prescribers accurate information about Neurontin and other drugs in its therapeutic class. At least $21 million will finance a prescriber and consumer education program, which will make grants available to governmental entities, academic institutions and nonprofit organizations. Grantees must be sponsored by participating Attorneys General and must use the money to provide fair and balanced information about drugs to doctors, other prescribers and consumers. Finally, up to $1 million of the fund will be used to evaluate the effectiveness of the education program.